Claim Substantiation – All About Advertising Lawhttps://www.allaboutadvertisinglaw.com
Regulatory & Litigation Developments for Advertisers and MarketersThu, 16 May 2019 20:41:53 +0000en-UShourly1https://wordpress.org/?v=4.9.10Best to Leave Cherry Picking to Cherry Farms: Regulators Revive Lawsuit Challenging Data Used to Support Memory Improvement Claimshttps://www.allaboutadvertisinglaw.com/2019/03/best-to-leave-cherry-picking-to-cherry-farms-regulators-revive-lawsuit-challenging-data-used-to-support-memory-improvement-claims.html
Mon, 04 Mar 2019 20:21:16 +0000https://www.allaboutadvertisinglaw.com/?p=5150Continue Reading]]>Three things to remember when making claims: always ensure that you have the appropriate substantiation—I forget the other two. Last week, the Second Circuit issued an order vacating the Southern District of New York’s dismissal of an FTC complaint alleging that Quincy Bioscience falsely advertised a memory supplement, known as Prevagen.

A little background: Quincy represented that Prevagen improved memory—and that studies proved as much. Advertising through multiple mediums, Quincy claimed Prevagen “improves memory” and “has been clinically shown to improve memory,” and that “a landmark double-blind and placebo controlled trial demonstrated Prevagen improved short-term memory, learning, and delayed recall over 90 days.” Quincy also represented that apoaequorin, a protein derived from jellyfish and an ingredient in Prevagen, “enters the human brain to supplement endogenous proteins that are lost during the natural process of aging.”

On January 9, 2017, the FTC and the New York Attorney General brought suit alleging that Quincy did not have the proper substantiation to make the claim that apoaequorin improves memory or that it enters the brain. Attached to the complaint was the study on which Quincy relied. Quincy moved to dismiss the complaint, arguing that the complaint failed to allege facts demonstrating that the representations at issue were false or unsubstantiated, and relying on the study to defend against the FTC’s claims.

There is a reason that attorneys are not known for their mastery of mathematics—we like to deal with words, and sometimes that preference can have a severely negative effect on the law. The District Court acknowledged that “no statistically significant results were observed for the study population as a whole on any of the cognitive tasks.” Quincy argued, however, that the study included some analysis of certain subgroups that had shown improvement. Notably, there was no qualification on any of Quincy’s advertisements disclosing the subgroups that had seen the most improvement, and, without going into a full statistical analysis, the FTC alleged that Quincy’s post hoc analyses of subgroups from the data greatly increased the probability that statistically significant improvements were by chance alone. The District Court disagreed and dismissed the complaint, stating, “All that is shown by the complaint is that there are possibilities that the study’s results do not support its conclusion.” Unsurprisingly, the FTC appealed, and a number of amicus briefs followed.

On appeal, the FTC argued that the District Court based its dismissal on findings that “Quincy prepared long after the study,” and that Quincy’s clinical trial “showed no statistically significant treatment effect.” Further, the FTC described the data that allegedly substantiated Quincy’s advertising claims as “cherry-picked findings” that rested on “scant results even though the results of the study were in fact overwhelmingly negative.”

The Second Circuit vacated the District Court’s dismissal. Ignoring the statistical oversight by the District Court, the Second Circuit ruled, “The FTC has stated a plausible claim that Quincy’s representations about Prevagen are contradicted by the results of Quincy’s clinical trial and are thus materially deceptive in violation of the FTC Act.” Taken as true, the FTC’s complaint undermined a number of Quincy’s representations. Notably, the Second Circuit reiterated that the clinical study of Prevagen “failed to show a statistically significant improvement in the treatment group over the placebo group on any of the nine computerized cognitive tasks.” This undermined representations that “the majority of people experience cognitive improvement” and that it is “clinically supported.” In addition, according to the complaint, Quincy’s apoaequorin claims that Prevagen would enter the brain were proved false by Quincy’s own safety studies, which “show that apoaequorin is rapidly digested in the stomach and broken down into amino acids and small peptides like any other dietary protein.”

A statistical study validating any claim can be compelling. The ability to represent that “clinical studies prove” a given statement can sometimes be so alluring that we ignore what the statistics actually show. It is always important that the results of a given study formulate a claim and not the other way around—especially given the FTC’s recent scrutiny of cognitive claims. For now, we will have to wait and see how the District Court deals with the statistics on remand.

]]>Ninth Circuit Affirms FDA Preemption in Tossing Vitamin E Supplement Casehttps://www.allaboutadvertisinglaw.com/2019/02/ninth-circuit-affirms-fda-preemption-in-tossing-vitamin-e-supplement-case.html
Wed, 27 Feb 2019 18:02:12 +0000https://www.allaboutadvertisinglaw.com/?p=5144Continue Reading]]>There is no denying that, at times, the express claims made on dietary supplement labels may seem to convey a broader implied claim to the consumer regarding the supplement’s performance benefits. While that may be true, last month the Ninth Circuit confirmed that plaintiffs cannot successfully allege that a lawful “structure/function” claim misleadingly implies that a dietary supplement will treat, cure, or prevent a disease under state law. In so deciding, the court found that Section 403(r)(6) of the Federal Food, Drug, and Cosmetic Act (“FDCA”) expressly permits dietary supplements to make claims that describe the role of a nutrient or dietary ingredient intended to affect the structure or function of the body (i.e., structure/function); and that Section 403A(a)(5) of the FDCA expressly preempts any California law that would differ from the FDCA’s allowance for structure/function claims.

While perhaps not surprising that the court reached this conclusion, a recent Ninth Circuit opinion is worth noting because it is the first time that the court has issued an opinion expressly confirming that lawful structure/function claims will have coverage against California’s strong consumer protection laws. We caution, however, that dietary supplement manufacturers may still face liability under state law if they fail to disclose material information about their products, including its safety profile.

The plaintiff alleged that the defendant’s Vitamin E supplement claims to “support cardiovascular health” and “promote[ ] immune function” were false and misleading in violation of California law because the Vitamin E supplements (1) did not prevent “cardiovascular disease” and (2) might increase the risk of all-cause mortality. The Ninth Circuit disagreed and affirmed the district court’s grant of summary judgment in favor of the defendant.

In evaluating the plaintiff’s claim that the defendant misleadingly advertised its Vitamin E supplement as preventing cardiovascular disease based on the product’s claims to “support cardiovascular health,” “heart health,” and “circulatory health,” the Ninth Circuit went back to basics to discuss the critical distinction in the FDCA between “structure/function claims” and “disease claims.” The former are expressly permitted for dietary supplements under Section 403(r)(6) of the FDCA, while the latter class of disease claims (i.e., claims to diagnose, prevent, treat or cure a specific disease or class of diseases) cannot be lawfully made for dietary supplements—and would render the product an unapproved new drug. The court took note of FDA’s 2001 structure/function rule which identifies the phrase “helps maintain cardiovascular function and a healthy circulatory system” as a permissible structure/function claim.

The court turned next to the issue of federal preemption. Despite the plaintiff’s argument that it did not matter whether the defendant’s claims were structure/function claims or disease claims because such claims were allegedly false and misleading, the court explained “to the contrary, it matters very much.” Specifically, the FDCA expressly (1) allows for structure/function claims and (2) preempts any state law “requirement respecting any claim of the type described in section 343(r)(1) of this title made in the label or labeling of food that is not identical to the requirement of section 343(r) of this title.” 21 U.S.C. § 343-1(a)(5). Accordingly, if the plaintiff were to successfully challenge a structure/function claim as an implied unlawful disease claim, doing so would undermine the FDCA’s clear distinction between structure/function and disease claims.

Applying the preemption provision to the defendant’s product claims, the court found the plaintiff’s claims concerning the Vitamin E supplement’s effects on cardiovascular health were preempted because he sought to “impose a requirement under California law that structure/function claims—at least those related to cardiovascular, circulatory, and heart health—made on a supplement’s label require proof that the supplement treats or prevents cardiovascular disease.” With regard to the “immune support” claims, however, the court did not preempt such allegations because the plaintiff’s claim turned on whether the defendant failed to disclose any material fact.

Specifically, the plaintiff challenged the Vitamin E supplement’s claim to “promote[ ] immune function” as false and misleading on the grounds that the defendant allegedly failed to disclose that Vitamin E may increase the risk of death. The Ninth Circuit noted that California’s labeling laws mirror the FDCA with respect to the provision that a food label “shall be deemed to be misleading if it fails to reveal facts” that are “[m]aterial with respect to consequences which may result from use of the article.” 21 C.F.R. § 1.21(a)(2). Because California’s law does not differ from federal law, the plaintiff’s state law claim was not preempted.

Reviewing the merits of the plaintiff’s allegation, however, the court found that the plaintiff did not provide sufficient evidence that vitamin E supplements are actually harmful. To that end, because the plaintiff failed to meet his burden to create a genuine issue of material fact as to whether the defendant’s immune-health structure/function claim was misleading, the Ninth Circuit dismissed the claim and affirmed summary judgment in favor of the defendant.

This decision provides important protection to dietary supplement manufacturers making structure/function claims. How much the ruling deters the plaintiffs’ bar remains to be seen.

]]>FTC and FDA Issue Warning Letters to Supplements Companieshttps://www.allaboutadvertisinglaw.com/2019/02/ftc-and-fda-issue-warning-letters-to-supplements-companies.html
Thu, 14 Feb 2019 15:09:35 +0000https://www.allaboutadvertisinglaw.com/?p=5133Continue Reading]]>Earlier this week, the FTC and the FDA announced a joint effort to combat unsubstantiated health claims in the supplement space. In three warning letters—to Gold Crown Natural Products, TEK Naturals, and Pure Nootropics, LLC (collectively, the “Companies”)—the agencies explain that certain efficacy claims may lack competent and reliable scientific evidence for support. Specifically, the Companies’ claims pertain to treating Alzheimer’s and remediating or curing other serious illnesses, including Parkinson’s, heart disease, and cancer. The FDA issued the letters the same week it announced an effort to modernize its oversight over dietary supplement products. Taken together, these two actions reinforce that the agency appears to be trying to differentiate participants in the supplement space.

The letters warned that the companies were making drug claims in violation of Section 201(g)(1)(B) of the FD&C Act and unsubstantiated disease claims under Section 12 of the FTC Act. Under the FTC Act, it is unlawful to make health claims that a product can prevent, treat, or cure human disease without competent and reliable scientific evidence to substantiate such claims. This standard can also entail a need for well-controlled human clinical studies. With respect to its review of the Companies’ websites and social media accounts, the FTC pointed to a number of exemplary claims that likely require substantiation. However, the FTC made clear that the examples are not exhaustive, urging the Companies to thoroughly review all claims and ensure they have adequate substantiation.

The agencies gave the Companies fifteen days to notify the FTC and FDA of the specific actions the companies will take to address the concerns outlined in the warning letters. Absent curative action, enforcement action is likely. Similar actions against other companies may be in the wings. Stay tuned.

]]>But Wait, There’s More! . . . Litigation: Federal Court Sustains Lanham Act Claims Against Allegedly False “As Seen On TV” Advertisinghttps://www.allaboutadvertisinglaw.com/2019/01/but-wait-theres-more-litigation-federal-court-sustains-lanham-act-claims-against-allegedly-false-as-seen-on-tv-advertising.html
Mon, 07 Jan 2019 18:48:06 +0000https://www.allaboutadvertisinglaw.com/?p=5096Continue Reading]]>Many retailers carry products with the phrase “As Seen on TV.” What if a product bearing that phrase, however, had not actually been seen on TV? A recent case in federal court in the Southern District of New York ponders that question.

In an advertising war between copper cookware competitors, plaintiff Emson sued its competitor Masterpan under the Lanham Act challenging claims made for the “The Original Copper Pan” (“OCP”). These claims included Masterpan’s use of the “As Seen On TV” logo; that the OCP was “original;” and that the OCP was “copper-infused,” “made of ultra-tough copper,” and made with “copper construction.” Emson alleged, among other things, that: (a) Masterpan falsely represented the OCP with its “As Seen On TV” label; (b) Masterpan’s “original” advertising deceived the public into believing that the OCP was the first copper pan of its kind; and (c) Masterpan mischaracterized the amount of copper in the OCP. Emson contended that these false claims diverted sales from Emson’s own “Gotham Steel” products, traded off its goodwill, and deceived consumers. Masterpan moved to dismiss Emson’s claims for lack of personal jurisdiction, improper venue, and failure to state a claim.

Emson claimed Masterpan’s use of an “As Seen On TV” logo was a material misrepresentation that leveraged the goodwill built up by Emson’s Gotham Steel television advertising campaign to create recognition of its products. Not only did Emson allege that this use was misleading, but Emson further alleged that Masterpan either does not market the OCP on TV or that it minimally does so. In denying Masterpan’s motion to dismiss, the court stated discovery will determine whether and to what extent the OCP has been marketed on television. Even if it is literally true that the OCP has been marketed on television, the use of the “As Seen On TV” logo may nevertheless be deemed misleading if the OCP only minimally appeared on TV.

Emson also claimed that Masterpan’s use of the word “original” in its product’s name suggests the OCP is the first of its kind, when in fact there were many copper pots and pans already on the market. For purposes of the motion to dismiss, the court agreed with Emson. In addition, the court found that Emson, based on its own tests of Masterpan’s products, had sufficiently alleged that Masterpan’s claims regarding the amount of copper in its products were false and/or misleading.

This battle for stovetop domination highlights some key insights brands would benefit from keeping in mind. Claiming a product is “As Seen On TV” can create risk when the product’s airtime is minimal. Furthermore, the distinction between “original in time” and “original to the brand” is important: take care not to mislead consumers as to the “original” nature of a product. Lastly, when making claims about the makeup of a product, be sure to have sufficient substantiation for those claims such that competitors can’t prove you wrong through their own testing.

]]>New Faces, Same FTChttps://www.allaboutadvertisinglaw.com/2018/10/new-faces-same-ftc.html
Wed, 31 Oct 2018 18:31:06 +0000https://www.allaboutadvertisinglaw.com/?p=5037Continue Reading]]>Recently, we wrote about new faces at the FTC, which, for the first time in its history, has five new Commissioners in a calendar year. This unprecedented change has cast some uncertainty on how the FTC will approach consumer protection enforcement. Recent actions by the Commission, however, indicate that despite new leadership, the Commission’s focus will be largely unchanged. Unsubstantiated health claims and unauthorized billing appear to remain high on the FTC’s list of priorities.

Last week, the FTC won a preliminary injunction from the Central District of California regarding the sale of oral dissolvable film strips promising smoking-cessation, weight loss, and enhanced sexual performance—all past favorites of the FTC. The advertisements for all three products made objective claims concerning performance such as the “88% Success Rate” of the smoking-cessation product or the promise that you can “lose 10, 20, even 100 pounds without giving up your favorite foods or adding any exercise.” The FTC alleged these claims were false, misleading, or unsubstantiated. The FTC also challenged alleged phony testimonials and threw in a false “Made In The USA” claim.

In addition to the product claims, the Commission also alleged that the defendants allegedly charged consumers without their knowledge or consent through an automatic renewal plan violating the FTC Act, ROSCA, and EFTA. Automatic renewal or negative option plans have frequently been the subject of enforcement by the FTCas well as several states in recent years. It does not appear that the new Commission will be changing course.

Finally, the FTC also alleged that the defendants violated the Telemarketing Sales Rule by sending prerecorded outbound calls to induce the sale of their products. So, while there might be new faces at the top of the FTC, it appears that for many marketers, it’s business as usual.

]]>FTC Stems Doc’s Stem Cell Claimshttps://www.allaboutadvertisinglaw.com/2018/10/ftc-stems-docs-stem-cell-claims.html
Mon, 29 Oct 2018 20:52:37 +0000https://www.allaboutadvertisinglaw.com/?p=5033Continue Reading]]>The Federal Trade Commission (“FTC”) recently settled a case against a physician and his two clinics over allegedly deceptive and unsubstantiated claims relating to their “amniotic stem cell therapy.” The physician, Dr. Bryn Jarald Henderson, frequently appeared in his companies’ advertisements and claimed that this therapy, which purported to use stem cells derived from amniotic fluid, could treat diseases such as Parkinson’s disease, autism, macular degeneration, cerebral palsy, and multiple sclerosis. The proposed settlement order imposed a $3.31 million judgment, which will be partially suspended after the defendants pay $525,000 to the FTC for refunds to harmed consumers, and a broad injunctive order. The order prohibits unsubstantiated claims relating not only to amniotic stem cell therapies, but also to several other therapies not included in the complaint, such as therapies using stem cells derived from adipose tissue, bone marrow, umbilical cord blood, and peripheral blood. In addition, unsubstantiated claims relating to food, dietary supplements, drugs, and medical devices are covered.

According to the FTC’s complaint, “[t]here are no human clinical studies in the scientific literature showing that amniotic stem cell therapy cures, treats, or mitigates diseases or health conditions in humans, and the medical community considers amniotic stem cell therapy to be an experimental and unproven treatment.” Despite this, Dr. Henderson’s clinics charged patients between $9,500 and $15,000 for initial stem cell injections and $5,000 to $8,000 for follow-up “booster” procedures. The clinics’ marketing materials included claims such as: “Lives are being saved, the blind see, the crippled walk . . . with a single therapy that lasts for years and impacts their lives NOW”; “[w]e can reverse autism symptoms”; “[t]hese macular degeneration stem cell treatments have been shown to improve sight in patients with macular degeneration”; and “[y]es, we can treat Parkinson’s.” The FTC alleged that Dr. Henderson could not substantiate these claims.

This isn’t the FTC’s first settlement in the medical space this year. Just last month, the FTC settled its complaint against iV Bars, alleging that the company lacked substantiation for its claims regarding the efficacy of its intravenously injected therapy products (“iV Cocktails”) in treating cancer, multiple sclerosis, and congestive heart failure. Earlier this year, the FTC settled its complaint against CellMark, alleging that the company deceptively advertised its products as effective treatments for cancer patients’ malnutrition and treatment-related cognitive dysfunction. The FTC appears to remain focused on health claims of all types and also to be following the marketing of new or innovative treatment modalities. Folks involved in advertising health care services would be wise to remember that an ounce of prevention is worth a pound of cure. In other words, talk to a lawyer before making aggressive health claims.

]]>Recent NAD Decision Largely Rejects Puffery Defenses and Consumer Testimonials that Disparage Competitionhttps://www.allaboutadvertisinglaw.com/2018/07/recent-nad-decision-largely-rejects-puffery-defenses-and-consumer-testimonials-that-disparage-competition.html
Thu, 26 Jul 2018 15:45:23 +0000https://www.allaboutadvertisinglaw.com/?p=4951Continue Reading]]>It seems like we (and the NAD) can’t get enough of “best.” In a recent case, the National Advertising Division (NAD) ruled that the advertiser, Mahindra USA, Inc., could not claim its products were superior without reasonable evidence.

Of course, context is king and “Best” advertisements can either be substantive claims, or considered mere “puffery.” (See here for a discussion on NAD and “best” claims). For some of the challenges in this case, Mahindra conceded its ads were substantive claims and argued that they were factually supported. For instance, Mahindra argued its best-selling claims were based on unbiased data. NAD agreed that a reasonable basis existed for the claims (although additional disclosures were necessary). For the majority of the challenged advertisements, however, Mahindra argued its statements were puffery. NAD rejected this defense in all but one instance and recommended discontinuation of the ads.

So when is a commercial message puffery? The inquiry revolves around the measurability of the advertisements. NAD explained, “[i]f the superlative is used in a way that suggests it is measurably better than its competitor, it is not puffery but a claim requiring substantiation.” Puffery can be found when “vague and fanciful” superlatives are used, rather than references to specific attributes suggesting product superiority in a recognizable way. Of course, determining if ads qualify as puffery is a murky endeavor. Thus, NAD considers both the words and contexts of the claims.

NAD determined Mahindra’s “Best Warranty” advertisements were substantive claims, not puffery, because warranties can be “objectively measured based on superiority in the warranty attributes valued by consumers.” In another ad, Mahindra’s website headline stated, “The Best vs. The Rest,” followed by the text: “[s]ee why our performance is superior. Take a look at how Mahindra stacks up against the competition…” Clicking through the webpage led to additional content on Mahindra’s product attributes such as lift capacity and fuel efficiency. NAD determined that this was also not puffery, because it invited consumers to compare Mahindra’s tractors to its competitors’ tractors “with measurable attributes in mind.” Even the engine oil ad claiming “Superior Protection With Our Branded Oil” was considered a claim requiring substantiation because “one reasonable takeaway is that ‘superior’ is being used in the comparative sense.”

The only successful puffery defense involved the taglines: “Toughest Tractors on Earth” and “Toughest Utility Vehicles on Earth.” NAD reasoned that, in the context of tractors, toughness is not quantifiable because it cannot be tied to a measurable attribute. However, NAD noted that toughness can be measurable in other contexts such as claiming superiority in glue adhesiveness, citing a 2006 decision in which “The Toughest Glue on Planet Earth” was a substantive claim.

While that may have been the best part of the decision, NAD also went on to address a challenge to the use of consumer testimonials. For consumer testimonials, the general rule is that advertisers may not make claims through testimonials that cannot be substantiated if made directly by the advertiser. However, some testimonial statements are considered expressions of opinions, rather than substantive claims. This is what Mahindra tried to argue here.

Testimonials are considered individual expressions of opinions that do not need substantiation when they lack a broader message about product superiority compared to similar products in the market. For instance, NAD approved the testimonial of one consumer’s general experience, “[Mahindra] dealer answered all my questions and helped me find the machine that really fits our needs and our lifestyle.” Other testimonials, although comparative in nature, were still acceptable as sufficiently vague expressions of personal satisfaction. For instance, permissible testimonials included “Mahindra gave me more for my money,” and “I chose Mahindra because it’s the best tractor in its class period.”

However, NAD recommended that several of Mahindra’s testimonials be discontinued as unsubstantiated claims, including every testimonial that mentioned John Deere directly: (1) “I’ve had a 45-horse John Deere and there is no comparison. The Mahindra has the torque you need to lift the loader;” (2) “[w]e bought a John Deere mower four years ago and it’s falling apart, but Mahindra has stayed a workhorse;” and (3) “John Deere acted like they were doing me a favor.” An advertiser may lawfully disparage a competitor, but only if the claims are “truthful, not misleading and narrowly drawn.” Here, NAD determined that Mahindra failed to provide evidence of superior lift performance, durability, and customer relations necessary to justify these claims.

The Mahindra decision is an important reminder that companies should be cautious in claiming superiority in measurable product characteristics without providing supporting evidence. To create advertisements that qualify as puffery, an advertiser should stick to three rules of thumb: (1) use hyperbolic language, (2) do not mention competitors, and (3) avoid highlighting specific elements of a product. To publish testimonials as mere opinions, advertisers should again refrain from naming competitors and specific product attributes, and choose statements that focus on a consumers’ positive experiences.

]]>Simply the Best, Better Than all the Rest: Superiority Claims and Substantiationhttps://www.allaboutadvertisinglaw.com/2018/07/simply-the-best-better-than-all-the-rest-superiority-claims-and-substantiation.html
Tue, 24 Jul 2018 15:14:03 +0000https://www.allaboutadvertisinglaw.com/?p=4947Continue Reading]]>Do you have the best wireless provider? If so, best in what sense—the best contract, the best devices, the best connectivity, the best value? That was the issue NAD recently addressed when it recommended that T-Mobile discontinue its “Best Unlimited Network” claim. AT&T challenged T-Mobile’s tagline in a recent NAD case, arguing that it was an unqualified superiority claim that T-Mobile couldn’t substantiate.

Now, the advertising world is no stranger to the word “best,” which we discussed in an earlier post on The Absolute Best Puffery Panel Ever. The problem arises when “best” is meant as a measurable claim, including its use here in connection with the phrase “unlimited network.” As NAD pointed out in this T-Mobile decision, wireless service providers should be able to tout the advantages that their innovations provide, but their claims must be substantiated to avoid misleading consumers. NAD reiterated in the T-Mobile decision that broad superiority claims (like “best” or “largest”) must be supported by reliable market data.

In this case, the parties disagreed as to how consumers understood the phrase “Best Unlimited Network.” T-Mobile argued for a narrow understanding of the phrase, saying that “unlimited” causes consumers to think of “unlimited data,” making it a superiority claim only about its unlimited high-speed data. Challenger AT&T responded that even if that were the case, T-Mobile would still have to provide reliable data showing the relative performance of each network for consumers who have unlimited plans. Additionally, AT&T argued that “Best Unlimited Network” spoke to a broad superiority claim that required T-Mobile to substantiate superiority in the various relevant attributes of its data, talk, and text mobile networks.

The NAD decision noted that T-Mobile failed to provide any evidence regarding how consumers understand the word “superiority” in this context, so NAD had to “step into the shoes of the consumer to determine the messages reasonably conveyed by the advertising.” NAD found that without an express limitation in the advertising, consumers could reasonably understand the claim to mean T-Mobile is superior in all areas (not just high-speed data). Because this might lead the consumer to believe T-Mobile’s network is superior to all others in speed, coverage, reliability, and metrics related to voice and text, T-Mobile would have to substantiate the claim in all those areas.

Unfortunately for T-Mobile, NAD found that the somewhat sparse evidence offered (speed tests from third parties Ookla and OpenSignal) did not match the breadth of the claim of “Best Unlimited Network.” T-Mobile also creatively argued that consumers value speed over all else when it comes to wireless networks so its relative advantage with respect to speed overcomes any disadvantages it may have in other network attributes. Unfortunately for T-Mobile, NAD found no evidence to support the idea that consumers value speed more. T-Mobile stated that they plan to appeal the NAD decision to the National Advertising Review Board.

In the meantime, the takeaway seems to be if your marketing people want to tout their product as the best, you might want to suggest that they also have the “best” substantiation for the claim.

]]>NAD Okays Use of Non-Industry Standard Testhttps://www.allaboutadvertisinglaw.com/2018/06/nad-okays-use-of-non-industry-standard-test.html
Thu, 21 Jun 2018 13:56:00 +0000https://www.allaboutadvertisinglaw.com/?p=4896Continue Reading]]>Many of you are no doubt familiar with ANSI testing, which is often touted as the gold standard in assessing product performance. However, other types of third-party tests exist, even if they have not risen to the level of being an “industry standard.” A recent NAD decision sheds some light on when and how advertisers can use such tests in their advertising.

Epson America, Inc. was challenged by Texas Instruments, Inc. (TI) for advertising its 3-chip 3LCD projectors as superior to TI’s 1-chip DLP imagers. 3LCD and 1-chip DLP are the two leading types of projectors and compete based on a number of attributes. TI alleged that Epson improperly relied upon Color Light Output (CLO) as a measure of brightness performance. (CLO is a relatively new method of assessing the brightness of individual colors which can then be compared to the overall lumens, or white brightness of a projector. (Still with us?)). TI also alleged that Epson made overall image superiority claims even though it only tested specific performance attributes. Finally, TI also alleged that Epson inadequately disclosed its affiliation with native advertising websites.

A key issue NAD analyzed was the legitimacy of the Color Light Output (CLO) measurement as a method to rate and compare brightness of color between projectors. NAD took a hands-off approach as “it is not appropriate for the advertising self-regulatory forum to tell the projection industry how it should measure projectors’ brightness capabilities.” Though CLO is not an established industry standard, NAD found that it is a published method that Epson is free to promote. However, NAD found that Epson’s more specific claims promising colors up to three times brighter were possibly misleading because they promised a certain level of performance which users would not necessarily achieve, given the diverse ways and locations where projectors are used. NAD did, however, leave open the possibility of some type of more qualified color brightness superiority claim, noting that even the challenger’s testing demonstrated that 3LCD projectors displayed brighter colors than DLP projectors across a wide variety of use conditions. (NAD also analyzed issues relating to color gamut and color accuracy which we won’t get into here, but if you’re in the market for a color projector, it makes for an interesting read.)

NAD also found that Epson’s advertising conveyed image superiority claims that were broader than the specific attributes it tested, such as brightness. Specifically, NAD cautioned Epson that side-by-side images convey a broad superiority message. For similar reasons NAD recommended Epson forgo its claims that “three chips look a heck of a lot better than one chip” and descriptions of the image comparisons as having “noticeable inequality.”

Finally, TI argued that Epson failed to adequately disclose its connection to two websites that promote 3LCD technology, ColorLightOutput.com and 3LCD.com. Epson argued that it included a disclosure at the bottom of each site stating: “3LCD is a marketing organization created and run by Seiko Epson Corporation to promote 3LCD technology and educate consumers about its benefits.” Epson further argued that there was a link to its corporate website, making the connection more apparent. However, NAD found that the disclosures could only be viewed by scrolling down the webpages and that they were in small font adjacent to colorful images and large text headlines. As a result, NAD recommended Epson move the disclosures to the top of the landing page as well as on each page within the website for clearer notice.

]]>FTC Cleans Up “Free” B2B Marketinghttps://www.allaboutadvertisinglaw.com/2017/11/ftc-cleans-up-free-b2b-marketing.html
Wed, 15 Nov 2017 16:27:54 +0000https://www.allaboutadvertisinglaw.com/?p=4655Continue Reading]]>The FTC is no stranger to cracking down on businesses offering so-called “free” products, only to charge the consumer for them later on. It wasn’t long ago that we wrote about that exact issue. But a recent FTC complaint shows that the FTC is not only cleaning up businesses selling directly to consumers, but also businesses selling to other businesses.

On October 30th, the FTC filed suit in Illinois against a number of cleaning product suppliers for violating the FTC Act, the FTC’s Telemarketing Sales Rule, and the Unordered Merchandise Statute. The complaint alleged that defendants, who sell office and cleaning supplies, called small businesses, hotels, municipalities, and charitable organizations, purporting to offer a free sample of their products. However, the samples were not free. Regardless of whether the consumer wanted the sample or not, the defendants would send one, and following not too far behind would be an invoice for that free sample.

According to the complaint, in order to increase the chances of getting paid, the defendants would list an employee’s name on the invoice, and, unfortunately, many businesses erroneously paid the invoices, assuming the order was legitimate. The defendants proceeded to send more supplies, and even larger invoices. When a consumer contested the shipments, they were told the repeat shipments were agreed to in the initial order. Failure to pay would result in additional invoices with “overdue” on the coversheet, and collection calls where defendants insisted the order was placed—even claiming they had a recording.

Once businesses caught on to the fact they were paying for free samples, many would contact defendants to seek a refund. In many cases, those refunds would be rejected, claiming that chemical merchandise could not be returned.

The FTC alleges that defendants have billed some consumers in excess of one thousand dollars for supplies they did not order. The FTC is seeking an injunction, an order freezing assets and granting immediate access to business premises, and appointment of a receiver.

The FTC’s claim is similar to its efforts in the late 1990s and early 2000s regarding allegedly deceptive office supply marketing.

As readers know, the FTC takes a dim view of allegedly deceptive “free” claims in the consumer realm. This case makes clear that the view applies to claims directed at small businesses too. Stay clean on your “free” claims.